APPENDIX E

RESUME OF FUEL, FUEL TRANSPORTATION PROBLEMS,

AND RELATED POWER SUPPLY PROBLEMS

Coal resources in the United States are abundant, and coal accounts for approximately 57 percent of present thermal electric energy production. A number of situations have combined in recent times, however, and a relatively serious coal supply problem has developed affecting all coal users, including the electric power industry which consumes more than half of the Nation's coal output. This has resulted in a considerable drain on coal stockpiles of both the producers and the consumers and FPC staff studies indicate that coal stocks of many electric utilities have become seriously depleted.

The desirable size of a plant's coal stockpile varies with the size and current use of the plant, the time of the year, the distance from the mines, and the transportation methods. However, an average of 60 to 90 days' supply is deemed to be adequate for most of the large baseload plants.

Recently, a number of plants have had only 10 to 15 days' coal supply, and several locations have had even lesser quantities on hand. Replies to a survey made by the Federal Power Commission just a few days ago, indicated that many utilities are failing to receive coal specified under long-term contracts because of mining problems and transportation difficulties. It is also reported that more and more of the low-sulfur coals are moving into the export market where prices are considerably higher than those usually paid by the utilities. The export movements have affected the Southeastern states more than others because the coal produced in that region is more attractive to foreign interests than the higher sulfur content coals of other regions.

The export coal movements also have an effect on transportation facilities since relatively long hauls are involved in reaching port terminals, and lengthy delays in emptying coal cars have sometimes occurred at the terminals. Thus, the cars are available for fewer ton miles in a given time period due to both of these reasons. Coal is a principal fuel for many electric utilities, and about three-fourths of all coal used by utility systems is moved from the mines to power plants by common carrier railroads for either part or all of the distances.

FPC's estimate of the electric utility coal stocks on hand April 1, 1970, was approximately 52 million tons or about a 60 days' supply at the current rate of consumption. These are average figures for the industry as a whole, and are not at all indicative of the serious situation which would develop within a few days in some particular areas if coal deliveries were interrupted for any reason. In fact, we also estimated that as much as 3,218,000 kilowatts of generating capacity would be forced to shut down

by the end of 10 days if general deliveries of coal were to be interrupted. The following table indicates accumulative effects estimated for various periods of interruption in coal deliveries of as much as 30 days. Also attached is a list of plants which, on April 1, 1970, had coal stocks of 45 days or less in terms of expected operating schedules at that time.

The 60-day coal supply of April 1, 1970, can be compared with stocks totaling 56 million tons, or 66 days' supply, on April 1, 1969, and 62 million tons, or 78 days' supply on April 1, 1968. Electric utility stocks traditionally hit their lowest point of the year by April 1, and then start building up month-by-month for the following winter months' maximum consumption. Some of the stockpile replenishing has normally been accomplished on many utility systems by using natural gas during the summer months. It is questionable whether any significant quantities of gas will be available for this purpose during the coming summer.

We have estimated that the electric utility requirements for the twelve months ending March 31, 1971, will be between 328 and 332 million tons. An average value of 330 tons compares with actual consumption of 310 million tons in 1969, 297 million tons in 1968, and 245 million tons in 1965. Consumption is expected to increase continually during the coming years.

The Bureau of Mines has estimated that the total 1970 coal production for domestic use and export will be 571 million tons whereas the estimated total consumption and exports are 583 million tons. Thus, there is a deficit of 12 million tons for the year. New regulations could lower the production below present estimates and thereby increase the deficit. Inasmuch as the electric utilities estimated 1970 requirements are 328 million tons, or 57 percent of the year's production, the anticipated deficit will make it virtually impossible for them to build up or maintain their reserves

at normal levels. Required utility deliveries for the calendar year 1970 are 266 million tons to meet the estimated requirements (328 million tons minus 62 million tons stock as of January 1). Thus, a minimum 60 days' stock would require an additional 63 million tons to be delivered during 1970. On a 12-month basis, ending March 31, 1971, the estimated consumption of 330 million tons and stocks of 52 million tons on April 1, 1970, would require deliveries of 278 million tons. If a minimum 60 days' reserve goal were met, the delivery of an additional 62 million tons during this 12-month period would be required.

In view of the above estimates of consumption and production, it appears that the supply problem for electric power requirements will grow more acute month-by-month unless more coal is produced and made available to electric utilities for use as power plant fuel.

Shortages of rail facilities, primarily cars, have been one of the principal contributing causes of delayed deliveries during the past several months. Other factors have been decreasing mine production, labor problems, and severe winter weather conditions.

There has been some improvement recently in the coal car shortage situation in most areas, but this is still a problem of considerable concern to some utilities. It has been necessary for some of the larger utilities to purchase or lease cars for their own use because of the lack of sufficient units under railroad ownership.

Slightly more than one-quarter of the total annual residual oil supply in 1968 was consumed by electric utilities while domestic production of residual fuel oil has been steadily declining. Imports have nearly doubled during the past decade and the Nation's dependence on foreign sources of supply is increasing. Unlike crude petroleum and refined products, residual oil imports in District 1 are not restricted by import controls and its use for electric power generation has been growing rapidly. The increasing pressure to use low-sulfur fuels has produced an increase in the demand for oil from African and South American markets, together with expansion of facilities for oil hydrodesulfurization facilities. It is expected that the oil industry world-wide will have the capacity to supply adequate quantities of residual fuel oil capable of meeting the most stringent sulfur control regulations.

Use of residual oil as power plant fuel is growing in some other areas where transportation is not an insurmountable obstacle. Inland utilities adjacent to the Mississippi River, for example, are converting to residual oil, and any sizeable expansion of this trend may introduce a need for improved river transportation facilities.

At this time, about one-sixth of all the natural gas consumed in this country is used for electric power generation and natural gas is very desirable fuel for power plants because of its ease of handling, relatively low

capital investment in gas-fired generating plant facilities, minimal waste disposal problems, and ability to meet air quality standards in practically all regions. There is considerable doubt, however, that domestic natural gas supplies will be adequate to meet all of the foreseeable demands between now and 1990. Liquified natural gas (LNG) will likely play an increasingly important role in the future gas supply picture, and recent announcements by the El Paso Natural Gas Company of plans to import

a billion cubic feet of gas per day in liquid form from Algeria probably mark the beginning of substantial imports from foreign sources. Although it may be attractive for other reasons, imported LNG at an estimated price of 54c/Mcf for baseload electric power plants does not appear to be competitive with nuclear power at present.

Fuel shortages and other problems which could lead to situations of inadequate bulk power supply have already had an impact on electricity use promotion programs in some areas of the Nation this year, and adverse weather conditions coupled with higher than normal forced outages of equipment could create problems in meeting summer peaks. The fuel situation is not one of the summer season alone, however, and could cause difficulty later if inability to obtain adequate fuel supplies continues for any extended period. Most of the major utilities and utility groups have developed generalized contingency plans to meet power shortage emergencies if they should arise, and the reliability councils are coordinating efforts to optimize the use of facilities in any such emergencies.

ER&R